When we talk about "exercising" in the context of Employee Stock Ownership Plans (ESOPs), we're referring to the action of buying the company's stock at the pre-determined price set in the ESOP agreement. This is often referred to as the "exercise" or "strike" price.

You can only exercise your options once they have vested. The vesting schedule, which defines when and how much of your options become available for exercise, is outlined in your ESOP agreement.

When you decide to exercise your options, you notify your employer of your intention to buy a specified number of shares at the exercise price. This transaction can often be done through your company's stock plan administrator. You would typically need to complete a form or an online process, and then you'd pay the exercise price.

The methods of payment can vary. Some companies may allow a "cashless exercise" or a "sell-to-cover" transaction, where you simultaneously buy and sell enough shares to cover the purchase cost, taxes, and fees, and you keep the remaining shares.

The primary reason to exercise your options is to buy shares of your company's stock at a price that is lower than the current market value. If your company's stock is performing well and the market price is higher than your exercise price, you could make a profit by exercising your options and then selling the shares.

Once you've exercised your options, you own the stock. You can choose to hold onto the shares and hope for further appreciation, or you can sell the shares. If you sell immediately after exercising (a same-day sale), you can lock in your gains. If you hold on to the shares, you're betting on the company's continued success.

Exercising stock options isn't without risk. If the company's stock price falls below the exercise price, your options could be "underwater," meaning you would not gain any benefit from exercising the options.

Also, remember that exercising options can have significant tax implications. It's always a good idea to consult with a tax advisor before making any decisions.

In simple terms, exercising is like using a special coupon to buy your company's stock at a discount. The hope is that the stock's value goes up over time, and you can sell it at a higher price for a profit. But like any investment, it's important to carefully consider the potential risks and rewards.